The Keynesian multiplier will be higher if
A)the marginal propensity to consume is larger.
B)the marginal propensity to import is larger.
C)real GDP is higher.
D)the expenditure line is higher.
E)the liquidity constraint is greater.

Question

Quizplus · Accepted Answer

The Keynesian multiplier represents the ratio of a change in national income to the initial change in spending that caused it. The multiplier is higher when the marginal propensity to consume is larger because then a larger portion of the additional income will be spent, leading to further rounds of spending and income generation.

The Keynesian Multiplier Will Be Higher If